Keysight Technologies at Deutsche Bank’s 2025 Technology Conference: Growth Amid Challenges

On Wednesday, 27 August 2025, Keysight Technologies (NYSE:KEYS) participated in Deutsche Bank’s 2025 Technology Conference, where CFO Neil Daugherty outlined a strategic overview that highlighted the company’s increased sales growth outlook and its ability to manage tariff headwinds. Despite geopolitical challenges, particularly in China, the company remains optimistic about leveraging its diverse portfolio to capitalize on opportunities in AI and other emerging technologies.

Key Takeaways

• Keysight raised its sales growth outlook for fiscal year 2025 from 5% to 7%.
• The company is addressing tariff headwinds through cost actions and strategic pricing.
• A significant portion of revenue is now derived from software and services, nearing 40%.
• The Spyrin acquisition is expected to enhance Keysight’s market position.
• Growth is driven by AI investments, particularly in the wireline business.

Financial Results

Keysight Technologies reported a positive revision in its sales growth outlook for fiscal year 2025, increasing it to 7%. This adjustment comes as the company benefits from strong performance in its wireline business, driven by AI investments, and unexpected growth in wireless.

• Approximately 40% of revenues now come from software and services.
• Tariff headwinds are expected to cost around $40 million per quarter.
• The commercial communications business is valued at approximately $2.5 billion.
• The aerospace and defense sector contributes over $1 billion to the company’s revenue.

Operational Updates

Keysight is actively managing operational challenges and capitalizing on growth opportunities across various sectors.

• The wireline business is experiencing growth due to AI advancements.
• The semiconductor sector is anticipated to rebound strongly.
• The wireless sector has shown unexpected growth, contrary to initial forecasts.
• The Spyrin acquisition is on track to close by the end of the fourth quarter.

Future Outlook

Looking ahead, Keysight remains bullish on its prospects, particularly in the rapidly evolving technology landscape.

• The company is optimistic about opportunities in wireline as technology cycles accelerate.
• Investment in non-terrestrial networks is driving wireless growth.
• Continued expansion is expected in the aerospace and defense sector.
• Growth in software-defined vehicles is anticipated to be strong.
• The "China plus one" strategy supports growth in Southeast Asia.

Q&A Highlights

During the Q&A session, several key points were addressed:

• Wireline growth aligns with company expectations, with wireless outperforming significantly.
• SAMR approval is the final step required for the Spyrin acquisition.
• Defense modernization priorities include communications and electromagnetic spectrum operations.

In conclusion, Keysight Technologies is poised for growth despite external challenges. For more details, readers are encouraged to refer to the full transcript below.

Full transcript - Deutsche Bank’s 2025 Technology Conference:

Operator: All right, I think we’re on time. I know we’ve got a few minutes. Few minutes left. Yes.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: When the lights go down, assume it. That’s right. You’ve got your logo up here, which is good. Have you got any slides to talk to

Neil Daugherty, CFO, Keysight: now? No slides. Slides.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: We managed to get the usually they have the Deutsche Bank logo. All right. Let’s get started. Welcome back to this final session of day one of Deutsche Bank’s Technology Conference. I’m delighted to welcome Neil Daugherty from Keysight, CFO.

I am Rob Sanders, European Tech Hardware Analyst. Keysight, for those of you who don’t know, is a leading test and measurement equipment company, but also shifting to software. So we are going to discuss the demand environment, tariffs. If you have any questions along the way, please raise your hand. And without further ado, maybe Neil, maybe just start by giving a little bit more of an intro than I just gave just to the company for those who don’t know and then we can get into more of the questions.

Neil Daugherty, CFO, Keysight: Yes. So as you suggested, Keysight is the leading provider in the electronic design and test space. We have a broad portfolio of hardware and software solutions, which we essentially bring to market targeted at a number of different end markets, most notably commercial communications focused on both wireless and wireline communications, aerospace defense where we are benefiting now from increased commitment in terms of spending as a percentage of GDP from the NATO allies and now multiple years of increased U. S. Aerospace defense budgets as well.

We have an industrial business that is focused on kind of next generation automotive including electrification of the drivetrain move to more of a software defined vehicle, which would include everything from autonomous driving, the various levels of autonomous driving, software defined vehicles excuse me, in infotainment systems and really all the in car electronics and in car networks that are part of a modern automobile. We have a semiconductor business that is really now being driven by move to smaller process architecture, things like silicon photonics, high bandwidth memory are drivers that kind of link back directly to the AI side of things. And then we have a kind of a catch all business in general electronics, which is kind of everything else that has electronic content in it. There are some submarkets in there which we tack separately. We pay attention to the education, advanced education research end markets, med tech, those areas are embedded in that as well.

And again, hardware and software about approaching 40% of the revenues these days are coming from software and services. The balance coming from hardware and that mix continues to shift in the direction of software and services. And maybe just lastly, the business is pretty heavily levered to our customers’ R and D labs versus their manufacturing lines. You could think of it as high 50% R and D, maybe 30 ish percent manufacturing with the balance being kind of post deployment installation maintenance types of applications.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. So you had your Q3 results last week and you did have a beaten raise, which is congrats on that. You’ve raised your sales growth to 7%, as I understand, for the fiscal year 2025 from, I think, closer to 5%. So can you parse out the delta in your improved outlook between AI spend perhaps upside to aerospace and defense and anything else?

Neil Daugherty, CFO, Keysight: Yes, absolutely. So as we entered this year, keep in mind ’twenty four is a down year for us, a cyclical down year, but we had started to see our end markets inflect driven most notably by wireline and the AI build out. But we had we realized that all of these end markets, which I just walked through, were not in phase with one another. Some of them were recovering or set to recover. Others we felt were still likely to be a headwind for us as we entered FY ’twenty five.

And so our base case was at the low end of our long term growth target of 5% to 7%. And so we were forecasting growth this year of 5%. We And have actually been able to increase that full year expectation each of the last two quarter ends. So at the end of Q2, we took it from five to 6%, the end of Q3, we took it from six to 7%. And so if you think about what has outperformed and what’s kind of more performed in line with expectation this year, first of would say what’s leading the growth charge for us is in fact our wireline business driven by AI, but I would say that growth has been largely in line with what we expected.

We expected it to be strong. It has in fact been strong and again largely in line with expectation. I think we have seen a little bit of upside on the aerospace defense side driven as I have mentioned by budgets, but I really think that opportunity is more in front of us than it is being realized currently, because there is a long lag that occurs between the time a politician stands on television and makes a commitment to increasing defense spending to the point that it’s actually in budgets, assigned to programs and then RFPs and other things have conducted and it actually results in orders on a company like Keysight. Semiconductor, we expected to strong rebound maybe slightly higher than expected. So I think there is some upside that we have seen in the semi space.

The auto business we expected to be challenging and in fact has been challenging. So again, I think that’s in line with expectation. And probably the single area that has the single biggest area of outperformance for us has been in wireless. Wireless, our base case coming into the year was for our wireless business, which is a large business for us well north of $1,000,000,000 was for that business to be flat, stable this year. And in fact, we have seen some growth, some nice growth in that business.

And so it’s not growing as fast as it was a couple of years ago, but it’s a big enough business and we’ve seen enough growth it’s a significant contributor to us being able to take up our growth rate for the year for the entire portfolio. So it’s been a good year. I think we’ve done a good job executing and converting that revenue growth to profitability, we have actually been able to take up our EPS growth expectations even as we have absorbed significant tariff headwinds. So it’s been a good year so far and with one quarter to go.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. And you mentioned tariffs, there was a little bit of disappointment I am sensing last week around some tariff discussion, maybe you could just clarify how you are seeing the tariff situation impacting your product cost and margin and where do you see the biggest impact today?

Neil Daugherty, CFO, Keysight: Yes. So obviously, we had now kind of two rounds of tariffs, obviously, initial round of tariff announcements back in April, which is kind of baselined at 10% for a lot of countries and then we saw this tariff rates increase most recently here in August. And I think right now we are likely to settle in somewhere around the $40,000,000 a quarter in terms of total tariff headwind as a result of two waves of tariff announcements. I think the good news is we feel like we largely have it handled. We have taken a set of actions to mitigate this tariff exposure.

It is going to take some time to fully be realized in our P and L. It’s a mix of cost action and operational efficiency actions and another set of actions that are focused on passing the remaining costs on to our customers via price increase. And it’s those latter increases that really do take time, right. We have not made an attempt to reprice backlog. We have honored outstanding quotations to our customers largely.

And so given our relatively large backlog, 2,400,000 of backlog, it does take time for new quotes that include the pricing changes to turn into orders and then ultimately turn into revenue. And so what we have said is we would have the April round of tariffs fully offset within Q1 and a second set of actions here in August and we would expect to have the August tariff increases offset before the end of Q2. And so again, I feel pretty good about where we are at and feel like we have got a really robust plan to ultimately make these things earnings neutral to our P and L.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Okay. And then let’s dive deeper a little bit on the end markets. So let’s start with wireline. Obviously, think investors, I am guessing, seem to be looking at you as a potential AI play, but it’s quite hard to pass out how much of your wireline story is to do with hyperscalers and how much is just general demand. So is there any way you can sort of quantify the AI contribution to that wireline growth you are seeing?

Neil Daugherty, CFO, Keysight: Well, let me start by quantifying our wireline business. So we have a commercial communications business that is in the vicinity of $2,500,000,000 and approaching 50 percent of that, we are getting very close on a quarterly run rate of having 50% of that business come from wireline side of things. Obviously, the major underlying driver of our wireline growth over the last eighteen to twenty four months has been this rapid acceleration of investments in AI. And I think the good news there is a couple of bits of good news here. First, we are very bullish on the opportunity as we look forward into FY ’twenty six and beyond, right.

What we are seeing is a shortening of the technology cycles as the industry looks to move to faster speeds from 100, 400 largely being 400 to 800, which is where most of the activity is right now, ultimately moving to 1.6 terabit, then 3.2, 6.4 and even talking about 12.8 at this point in time. And as those cycles shrink, you essentially need to redesign all of the equipment that makes these networks work, the network silicon, the connectivity, the optical transceivers, the network equipment and then ultimately and we have touch points with all of those aspects of the hardware build out itself. And then we actually have touch points with the hyperscalers themselves that are building out these data centers. And so you have a combination of multiple touch points between Keysight’s technologies, both physical and protocol layer solutions to service this ecosystem and shortening design cycles as the industry works through various technology inflection points to give us confidence in the opportunity as we move forward. And so very exciting and again a significant driver of growth for us as we look both backward over the last say twelve to eighteen months and forward into the coming year.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. And would you call out anything in particular like it sounded like it’s mainly interconnect driven, is it Ethernet, is it PCIe, is there perhaps a trend towards scaling out versus scaling up that you seeing that could be an inflection for you guys or is it just as you say a shortening of the whole cycle overall that’s driving your business?

Neil Daugherty, CFO, Keysight: Yes, I think it’s an interesting question. I think we have the opportunity to benefit both from scale out and from scale up, but as I think of those two opportunities and keep in mind as I have said, our business is significantly more levered to R and D, that’s true at the Keysight level and it’s even more true within our wireline business, which is probably 70% R and D versus manufacturing. And so given that emphasis in this space on R and D, I think of the scale out play is more of a volume play, whereas the scale up play is more of a technology play. And so as I think about those two things, I tend to think of the scale up play as the bigger long term opportunity for us, because not just the move through various speeds, but if you think about the multiple developing alternatives to the NVIDIA ecosystem, whether that’s Ethernet or UA link or PCIe based solutions, there is a complete set of tools and equipment that need to be a build out in support of each of these standards. And again, we have touch points at silicon, connectivity, network appliance and with the hyperscalers that will ultimately deploy these technologies.

And so kind of a little bit of a more the merrier standpoint when you are selling into the R and D lab, the more technologies that they are trying to bring to market, we are agnostic ultimately to winners and losers, but it creates a tremendous opportunity in the interim.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. And if anyone has any questions, please do raise your hand. Let’s switch to wireless. Obviously, I think if you think historically, it was one of your larger businesses, it sounds like wireline is now bigger than wireless at the moment. How is AI influencing your test product development in wireless?

I’m thinking of features like RFB performing using AI to software innovation, how are you seeing that and how can you monetize

Neil Daugherty, CFO, Keysight: Yes. So, a couple of comments. First of all, just correct the record. Wireline is wireless is still bigger, but the gap is closing and we are very close to fifty-fifty. So, but wireless is still the larger business.

We will see when that transition happens and ultimately wireline becomes bigger, which appears to be the trajectory that we are on. I think as it relates to AI, what we are seeing is within our customer set primarily on the network side and we are in the very early stages of the as you can think of it as more research rather than development at this point in time. They are looking at how do they use AI to optimize these networks, how do they optimize for power efficiency, how do they optimize for network traffic, how do they model the behavior of the actual user themselves so that they can better predict and ultimately shape the form of the beam to provide better connectivity for a mobile user. So what Keysight does to enable this AI learning within this wireless network ecosystem is we essentially have simulation emulation tools that can essentially simulate very high volume network traffic that can be used for these models to learn. And so we can simulate the traffic, they can create a model, they can learn and ultimately apply these AI algorithms to again model power efficiency or schedule call scheduling, these types of things.

And then once the model has been built, you can use these same tools to test the efficacy of the actually AI driven model itself. So it’s a highly software driven focus to actually enable the AI modeling and the learning of these AI algorithms for these ecosystems.

Operator: Got it.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Sorry, there is a question, I can’t see. Yes, go ahead.

Neil Daugherty, CFO, Keysight: I don’t necessarily know specifically about the transaction, but certainly non terrestrial networks are a significant driver of investment in our ecosystem today. And one of the areas where I talked about earlier about one of the things that surprised us, the upside was growth in wireless. A lot of that investment, one of the areas where we are seeing it is this investment in non terrestrial networks. And so when you think about these non terrestrial networks, the connectivity between a earth based device and a satellite at the physical layer is not that much different than a terrestrial wireless connection. And so we use similar tools, but you have added complexity, right.

The satellite itself is moving at what is it 27,000 kilometers per hour or something like that. And so you have to you have this speed, you have the distance, you have the speed and you have the complexity of handoffs from one satellite to the next that need to be modeled. And so similarly to other industries, we have multiple touch points within these ecosystems that folks that are making components that go either into the satellite or to the ground station, sub assembly things like antenna arrays that need to be developed and tested and then the actual satellite itself as well as the ground station and the communication channel, earth to satellite communication channel. So we can provide in this case simulation capability to simulate these data links to test the ground station, to test the satellite and then a whole slew of both physical and protocol layer tools to test the components and subassemblies that make up these complex networks. So again, exciting for us because of the multiple touch points.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. Yes. And how is your positioning within the satellite space, I mean relative to your position with the wireless in the wireless sort of classic wireless operator area? I mean do you have a comparable share?

Neil Daugherty, CFO, Keysight: Yes, mean I think the thing that is unique about Keysight relative to other players in the broader test space is the breadth of our portfolio. We have been in this business a very long time. We have by far the most complete set of tools and we have for a long time, but even if you go back and look since the launch of Keysight and the spin off from Agilent, at that time we were very much focused on physical layer test and what we did post spin is we wanted to expand our touch points with these marketplaces and move up the protocol stack and so we moved into these protocol layers. We bought a company in 2015 called Anite, which got us protocol layer solutions for wireless. In 2017, we bought a company called Ixia, which got us protocol level solutions for wireline.

And so now as a result, we have a pretty unique portfolio, again a complete set of physical layer tools coupled with protocol layer solutions for both wireless and wireline that’s unique in the marketplace. And what that allows us to do for our customers instead of just selling them tools and allowing them together to cobble together a solution by buying tools from multiple vendors, we have a better opportunity to understand the specific challenges of the industries we are facing and provide them a complete solution with hardware, with software, with services that addresses that and essentially accelerates their time to market, which is why the focus on R and D, what are we really selling, you are selling time to market to our customers and it’s a breadth of our portfolio that I think uniquely positions us in the marketplace to do that.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Got it. And then let’s switch to Spyrin, a company I used to cover. You are awaiting regulatory approval to acquire Spyrin. You have had to make some concessions along the way. It sounds like you’re going to close the deal by October, but there’s still some approvals to go.

So maybe you can just remind us where you are in terms of the approval process and which parts of the portfolio you’ll be acquiring and you’re looking forward to having part of it?

Neil Daugherty, CFO, Keysight: Yes, absolutely. So there is kind of one step left and there is one big step left and then there is some kind of formality steps that we will also need to go through. The big remaining step is we are waiting on approval from China SAMR. All I would say is our conversations with SAMR have been and continue to be constructive and we are highly optimistic that we are going to get this transaction closed by the end of our fourth quarter, but we will continue to work with them until those approvals are in hand and we can close the transaction. I think from a strategic viewpoint and why this transaction was important and why we are excited to have it be part of Keysight, there are couple of SAM expansion portions of their business, which create a material expansion to our served addressable market.

One is around precision location, kind of GPS precision location. This is probably the crown jewel from our perspective. It is something that we believe is going to be critical to six gs. It’s critical in the aerospace defense sections. I just talked about how they are using AI to improve the beam forming as they model the likely behavior of a user with a mobile user with a cellphone, the more precise location you can get, the better off you are going to be able to do in modeling those types of things.

So I think there is a gap in our portfolio. We believe it’s going to be integral to success in six gs and it’s something that we are excited to have on board. The second thing is more of a network monitoring thing. So we do a lot of stuff again in the R and D lab, in manufacturing helping bring these communications ecosystems to market and getting them deployed, but we didn’t have a lot of touch points with those ecosystems once the networks were deployed. And so this gives us a further extension of touch points with the ecosystem into deployed networks and yet another revenue stream.

So excited to bring those things on board. Ultimately, we expect once we get the business integrated, it’s going to be accretive to both gross and operating margins at the Keysight level, so a great opportunity for us to create value for shareholders.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Great. And that’s a neat segue to aerospace and defense given their positioning business. I guess that could be relevant for robo taxis as well. But let’s talk about aerospace and defense. There’s been a lot of different policy announcements, the NATO spending increase, the big beautiful bill, there’s been Doge.

What have you seen at a net level? Have you you said it sounds like it’s more ahead of you, there are, I guess, potential headwinds you might have seen from government efficiency measures. So what have you seen so far?

Neil Daugherty, CFO, Keysight: Yes, I think a couple of things. So first of all, we believe net additive, so certainly net additive at the macro level. We have actually seen less detraction from things like Doge than you might have expected, because again, where we tend to play aerospace defense technology spending and the Doge was really more about efficiency gains rather than trying to reduce fundamental spending in core technologies as we move forward. I think one of the things we are benefiting from in The U. S.

Is there is does seem to be one of the few areas where there does seem to be some political alignment between the Democrats and Republicans in terms of the need to invest not just in defense, but in defense technology and I think that’s been helpful. We have seen increasing defense budgets across both the Trump one, Biden and now Trump two presidential administrations And so that’s been has been additive and we would expect to continue to be additive. I think one of the big changes that we are starting to see now really in terms of picking up of activity is the increased commitment to spending as defense spending as a percentage of DUP among the NATO allies. Again, can take time to work its way through, but we are seeing increased activity, increased quoting activity, bidding activity on programs with our European defense customers and again these tend to be long term commitments. And so it’s something that we are excited about and has us very bullish on the aerospace defense opportunity as we look forward.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: And what are the sort of priorities that excite you the most in the defense modernization or is this just a modernization process of bringing this existing equipment up to date or is it more these Germanys of this world that are stepping up for the first time?

Neil Daugherty, CFO, Keysight: Well, I think it’s both. I mean I think as these NATO allies who maybe have been under spending for a period of time looked at have dramatic increases in their spending, a certain percentage of that is going to go to things that we don’t necessarily care about, boots and weapons and bullets and then a certain percentage is going to go to things that we very much do care about, technology investment. And that technology investment primarily centers around communications, signal capture, signal jamming, understanding the communications signature of the battlefield if you will, electromagnetic spectrum operations, radars, these types of things are where we have the biggest contributions to make. And I think it’s highly likely that as the NATO allies increase spending that a not insignificant percentage of that business, particularly as it relates to Keysight with a $1,000,000,000 plus aerospace defense business is going to create significant opportunities for us moving forward.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Got it. And let’s switch to automotive in the interest of time. So we’ve got this big change happening with both on the powertrain to EVs, there’s been a there’s a change from the West to China, which looks like it’s going to dominate. But at the same time, we’ve got this transition to software defined vehicles, which China seems to be leading on. How are you positioned relatively given that China seems to be taking the lead in a lot of this innovation?

Neil Daugherty, CFO, Keysight: Yes. I mean I think I’d say two things. I think as it relates to the drivetrain and the move towards electric vehicles, China has been a significant disruptor, not unlike what happened in solar panels. There are lower cost Chinese batteries available that I think create real questions as to what level of investment is going to continue in the OEMs and the other big auto producing countries around the world. And I think that’s a question to be answered.

I think if there is good news in there, I think it’s that our EV business has been significantly derisked at this point. There is not a lot of downside. We will see if those markets recover. I think where opportunity lies for us is in the software defined vehicle space, can think about autonomous driving is probably the really big opportunity that will play out over at least a decade, maybe a couple of decades if you think about true level five autonomous driving, but also included in there would be infotainment systems, in car networks, a lot of in car electronics are also included in this space. And there I do think you are going to see the broader global automotive ecosystem continue to develop and invest and it goes beyond the car itself.

You talk about vehicle to everything communications, you got infrastructure elements and other things that are going to need to include these communications technologies. And so when you think about autonomous driving, how does it ultimately get accomplished? It’s through a confluence of multiple different communications technologies, things like five gs and six gs, but also Wi Fi, in car land, radar, LiDAR systems, these are all areas where Keysight has core expertise. And so I think we are uniquely positioned to help the industry particularly as things standardize, right. We love industries that have standards.

I think the auto industry has resisted that in a lot of ways. You can think of that about charging, right. The Tesla plug is different than BMW plug as an example, but I think if you talk about getting to a true broad scale autonomous, there is going to have to be some standardization. These industries are going to have to come together, which creates interoperability challenges and all sorts of other things, which is good for Keysight. So as I said, where we are seeing strength in auto today is in that software defined vehicle and this is an area where we are very bullish as we look forward.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: And if China does take the lead, is there a risk in five to ten years that those guys switch from sort of best in class Western vendors to domestic vendors even if they are inferior, maybe they are under pressure?

Neil Daugherty, CFO, Keysight: Right now, think that’s unlikely. I just think first of all, I think it’s significantly more challenging technological problem than the battery problem where there has been some significant Chinese disruption. I also just think it’s unlikely that these major auto OEMs around the world, you think about the big names in Japan and Korea and Europe, it’s going to seed these markets, right. And so I just think that there is going to continue to be development across the board and ample opportunity for Keysight to compete and win.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Got it. And then you’ve got your semiconductor general electronics business. Obviously, there’s a lot of design activity around AI chips, perhaps not that actually that much volume relative to the overall semiconductor industry, but obviously, if you are playing into the R and D side, then presumably you have seen quite a big uptick and how is that affecting you so far today and where are we in the kind of baseball innings of that? You’re talking about

Neil Daugherty, CFO, Keysight: the use of AI in chip design?

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Said the AI semiconductor AI related semiconductor demand, for example, custom silicon from hyperscalers, obviously new potential customers, how have you seen that impact? Yes. So I mean if

Neil Daugherty, CFO, Keysight: you think our semiconductor business is pretty we have a couple of highly differentiated positions. We are not a broad semiconductor tools player, but within our semiconductor business, we make a tool called the Parametric Tester. It’s essentially a wafer level test at the end of the manufacturing process, but we are definitely seeing AI driven demand, right, because you can point it back to high bandwidth memory, you can point it back to the demand back to the migration towards smaller process architectures and an increasing focus on silicon photonics and all of those things directly link back to AI. And so we tend to be more agnostic to what the actual functionality of the chips itself were more of a wafer level test on the production processes, but we can tie the demand that we are seeing back to the underlying market drivers and AI is clearly one of those drivers that is driving demand across the semi ecosystem.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Got it. Last couple of questions unless there is any from the audience. Just one more on China and one more on margins. So on China, it’s about high teens percent of revenue as How I understand is it that the sort of overall geopolitical backdrop affected that market and what do you see going forward? You have touched a bit of on in terms of auto, but what about for your whole business?

Neil Daugherty, CFO, Keysight: Yes. I think there are puts and takes as it relates to China. So first of all, we have been dealing with now for six or seven years that kind of the ongoing evolution of trade sanctions on China. Obviously, it started with restrictions on selling it aerospace defense and then it was Huawei and then it was semiconductor. And this has been an ongoing headwind, which we have largely been able to kind of plow through and continue to grow our business.

I think with the escalation of the tariff environment and just kind of the prolonged nature of this, we are seeing an increased portion of the industry move to at least the China plus one strategy, if not just an all out move out of China. So what we have seen some pullback in some areas of demand in China, it’s been offset by a corresponding increase in demand in Southeast Asia. And so kind of it gives in one area and takes away in the other. And I think the net benefit is that we continue to see growth across the broader Asia region as a result.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Got it. And just a last one on margins, obviously, you have been transitioning to a greater portion of recurring revenue, greater portion of software, how much more margin upside can you push through from that transition from here?

Neil Daugherty, CFO, Keysight: Yes, mean I continue to think about the high level operating model, which we have laid out for investors, which essentially calls for our business to grow at 5% to 7% on a sustained basis over the cycle on average. And when we grow at that level, we can deliver 40% operating leverage to the bottom line. And so you see that this year, we are actually slightly over delivering to that metric ex tariffs and then the tariffs have obviously been a little bit of an exogenous shock to the system. But as our businesses continue to recover, we expect to continue to grow in line with those long term averages and expect to continue to increase our overall profit margins by delivering to this strong incremental. That’s the way we manage our business and we believe we can continue to deliver to that model.

Rob Sanders, European Tech Hardware Analyst, Deutsche Bank: Well, great. Thanks very much. I really appreciate the time and let’s go to the drinks.

Neil Daugherty, CFO, Keysight: All right. Thank you, everybody.

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